Investors in the venture capital space have outlined ways startup founders can overcome challenges when building their companies.
They spoke at the Duale, Ovia, and Alex-Adedipe, TMT Business Law breakfast series 2024 last week.
“A lot of businesses start by identifying a problem, building, and expecting that people will come; that usually is not how to create a business,” said Femi Ogunjimi, co-founder and managing director at CardinalStone Capital Advisers.
According to him, building a business that can scale and become a growth story requires answering several questions correctly. The first is, “How am I going to make money?” Having a good product doesn’t necessarily mean that it will generate revenue for you.
“Secondly, how am I going to generate money, from what I have seen so far, the easiest thing that kills a business is running out of cash, whether you have a great idea or not you’ve to be strategic,” he said.
“Also, how much money will I make, how defensible is my position? The idea of this is having a good product that can make money but if you can be replaceable by someone then that is going to be a great challenge. Lastly, understanding the market, the skill set, and the required partnerships,” he said.
Despite global economic uncertainties, Nigerian startups demonstrated resilience, raising $160 million in funding during the first quarter of this year, as reported by Africa: the Big Deal.
In developing a business you need capital. In context, capital that has the connections you require, capital that can guide you to position yourself to thrive in this market, according to Kola Aino, founding partner of Venture Platform.
“Access to local investors with relevant connections and market insights is crucial for startups seeking sustainable growth,” he said.
He advised founders to build advisory boards comprising experienced professionals to navigate the complexities of the market effectively.
During the panel session, Olumide Soyombo, co-founder of Voltron Capital when making a risky investment the first thing an investor needs to evaluate is if this company has to exist.
“This helps you understand certain companies that need to exist in that market, then see the founder that is pitching you that same thing has the right attitude to build.”
“The second thing I look out for is the team, how do they handle the problems around them, whether they are reliable, do the market know them.”
According to Soyombo, because you solve a problem doesn’t mean you can scale in that market. That is because some market strategies are untapped.
“Differentiating the market that needs to be untapped, and knowing the companies that are moving toward that goal is worth the risky investment,” he said.
